Hexun Investment Advisor Dong Kai: BOLL Bollinger Bands Indicator

Today, we’re going to talk about the “Orbit Master” in technical analysis—the Bollinger Bands.

Many retail investors can’t read the trend, so they keep chasing and selling during range-bound swings. Bollinger Bands helps you solve this problem. It tells you directly whether you’re in a strong trend or a consolidation by using three bands—so you know whether to hold your position or exit.

Bollinger Bands consist of three lines: the upper band, the middle band, and the lower band. The middle band is the 20-day moving average; the upper band is the middle band plus two standard deviations; the lower band is the middle band minus two standard deviations. For 95%+ of the time, the price runs within the bands.

How do you use it? Remember these three rules.

First, the middle band determines long or short. If the price is above the middle band, go long; if it’s below the middle band, go short. If the middle band is sloping upward, that’s a long-side trend; if it’s sloping downward, that’s a short-side trend.

Second, chase the trend when the bands open. When the upper and lower Bollinger Bands suddenly widen, like a trumpet mouth, it means a trend is coming. If the opening is upward, go long with the trend; if it’s downward, go short with the trend.

Third, wait for the bands to tighten before a breakout. When the upper and lower bands tighten very narrowly, it shows long and short are locked in a standoff—an imminent breakout. Once there’s a breakout above the upper band on increased volume, it’s an upside breakout; if there’s a breakdown below the lower band on increased volume, it’s a downside breakout.

A common mistake new traders make is: as soon as the price touches the upper band, they sell; as soon as it touches the lower band, they buy. But in a strong one-way market, the price will keep moving along the upper or lower band. In that case, overbought/oversold signals fail—never trade against the trend.

In practice, Bollinger Bands are best used together with KDJ or RSI. In a range-bound market: when the price reaches the upper band plus a KDJ dead cross, sell; when it reaches the lower band plus a KDJ golden cross, buy. In a trending market: when the bands expand in the same direction as the middle band, hold your position and don’t get off too easily.

Remember the口诀: the middle band determines long or short, chase the trend when the bands open, wait for tightness before a breakout—let the bands accompany your trades.

（责任编辑：张岩 ）

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